Climate change poses an enormous threat to our economy and quality of life, and readily available solutions are not being implemented fast enough to head off the worst damage. That’s why the National Whistleblower Center (NWC) launched our Climate Corruption Campaign in January 2020, with a focus on the fossil fuel and timber industries as well as their professional enablers, including the securities and banking industries.
The Climate Corruption Campaign is the first sustained effort to educate potential whistleblowers in the fossil fuel and industrial logging industries – as well as those in enabling industries – about their rights under whistleblower laws, including the right to keep their identities confidential. The campaign also works in the policy arena to strengthen whistleblower rights.
There are five key facets to our approach:
- We’re educating whistleblowers on how to come forward with allegations confidentially and which laws protect them.
- Partnering with the National Whistleblower Legal Defense and Education Fund, NWC assists whistleblowers in obtaining competent whistleblower attorneys. These attorneys assist whistleblowers in filing allegations of crimes with the appropriate law enforcement agency.
- We’re helping whistleblowers protect themselves by educating them about how to keep their identities confidential, guard against retaliation, and secure rewards when they help the government produce monetary sanctions against wrongdoers.
- We’re encouraging other whistleblowers to step forward by publicizing these protections and rewards.
- We’re defending and strengthening laws and agency rules that are needed to protect and reward whistleblowers who help expose climate-related corruption.
Helping educate whistleblowers is NWC’s Chief Counsel Sharon Eubanks, a corruption expert who served as lead counsel in the largest-ever civil RICO enforcement case, U.S. v. Philip Morris USA. Eubanks recently testified before Congress on the linkages between the organized deception campaigns of the tobacco and fossil fuel industries.
What Exactly is a Climate Change Whistleblower?
A climate change whistleblower is a person who discloses information about violations of law, gross mismanagement of funds, abuse of authority or other wrongdoing that exacerbates climate change. As with all other whistleblowers, climate change whistleblowers possess information about wrongdoing not generally known by the public and disclose this information (typically to a government official, journalist or employer) for the purpose of rectifying the wrongdoing.
In the case of climate change whistleblowers, rectifying the wrongdoing could include reducing threats to the economy and global financial stability posed by climate change risks as well as abating further damage to the environment and public health.
NWC encourages those with information about improper concealment of climate change-related risks in these industries and others to consider serving as protected whistleblowers under the U.S. Dodd-Frank Act. Climate change whistleblowers may also have rights under the Foreign Corrupt Practices Act, Internal Revenue Code, False Claims Act, or Lacey Act. Securing protection and eligibility for financial rewards under these laws does not require U.S. citizenship, and the laws are often enforced against non-U.S. companies doing business or selling shares in the U.S.
Why NWC is Focusing on the Fossil Fuel and Timber Industries
The disruption of the earth’s climate is one of the greatest challenges facing our society. Greenhouse gas emissions are continuing to increase, as evidenced by a recent Global Carbon Project report finding that in 2019, despite impressive progress with clean energy, global fossil fuel emissions had increased for the third straight year. While behavioral changes related to COVID-19 caused a small drop in emissions, without structural changes, a rebound in emissions is almost certain. And these emissions are already having dramatic impacts. Sea levels are rising. Animal and plant species are rapidly going extinct. Natural phenomena like hurricanes and forest fires are becoming increasingly more violent.
Those impacts will worsen substantially unless we transition away from fossil fuel use and maintain intact forests for carbon storage. And the impacts of greenhouse gas emissions are not spread evenly. Those who have contributed the least to the problem – the poorest communities around the world and the generations to come – will experience the greatest impacts.
Fossil fuel use and deforestation are the primary drivers of this crisis. Despite recent successes in scaling back investment in oil and coal, natural gas use is increasing. And in developing countries, coal is still a major energy source. As for deforestation, while sustainable forestry is on the rise, industrial logging of forests is still the primary source of timber and timber-based products and in the tropical forests with high carbon stocks, much of this logging is unsustainable and illegal.
How We’re Defining These Industries
What is the fossil fuel industry?
The burning of fossil fuels such as oil, natural gas, and coal is the largest contributor to greenhouse gas emissions, which hold heat in the atmosphere and warm the plant. The fossil fuel industry includes companies whose primary business is the extraction, refinement, processing, distribution, or sale of oil, natural gas, or coal. The processing of oil and gas also includes the production of feedstocks to produce petrochemicals and plastic.
What is the timber industry?
The global timber industry includes companies that commercially log, process, or trade timber. Currently, unsustainable practices in the global timber industry are a major driver of deforestation, particularly in tropical forests. Deforestation is a key contributor to climate change.
What constitutes a professional enabler?
While the fossil fuel and timber industries are directly involved in climate change, most of the companies in these industries could not operate without support from financial institutions and other professional services. These can include banks and other financial institutions, insurance companies, auditing and accounting firms, credit rating agencies, public relations firms, and other consulting agencies.
By providing key services to the companies involved in fossil fuel extraction and deforestation, these companies enable climate change. Through willful, complicit, or negligent conduct, these groups can also serve as professional enablers of climate-related financial crimes.
As gatekeepers, professional enablers often play a central role in engineering and legitimizing complex financial schemes. As intermediaries, they can also play a role in coordinating industry-wide schemes. Examples include banks that facilitate money laundering, auditors who fail to properly audit financial statements or fossil fuel reserve estimates, shipping companies that facilitate bribes, or lab testing companies that falsify results for oil and gas and coal testing.
What is Climate Risk Disclosure?
In the past several years, U.S. states, cities, counties and individuals concerned about climate change have filed important lawsuits against fossil fuel companies, asserting that the companies are responsible for climate-related damage due to their carbon pollution. These cases confront “what might be the greatest scam in history,” in the words of historian Naomi Oreskes: the massive disinformation campaign designed to stall action on climate change by persuading decision makers and the public that it is not a problem to be taken seriously.
However, the National Whistleblower Center is primarily concerned with a related deception that, with a small handful of notable exceptions, is unaddressed in the climate change lawsuits filed to date: the dramatic understatement of risks posed by climate change to fossil fuel and timber companies’ own financial condition and to the economy at large, or simply put: climate risk disclosure.
Climate risk disclosure refers to corporate disclosures of critical information about exposure to climate change-related risks. Climate change presents two main categories of risk to financial assets: transition risks and physical risks. “Transition risk” refers to risks of losses due to changes in law, policy, technology and markets related to the transition to a low-carbon economy. “Physical risk” refers to risks of losses arising from rising seas, intensified heat, droughts, floods, storms, and wildfires, and other physical impacts of climate change.
In terms of legal requirements for climate risk disclosures, requirements vary between countries and industry sectors. In the United States, federal securities laws require that publicly traded companies disclose risks that are “material” to shareholders, but these companies are given very little guidance on how to apply this requirement to climate risks. Privately held companies have virtually no disclosure obligations. Until very recently, climate risk disclosure by companies around the world have been governed by voluntary regime created by the Task Force on Climate-Related Financial Disclosures (TFCD).
However, investors and other stakeholders around the world have increasingly demanded mandatory frameworks and governments are beginning to respond. In September 2020, New Zealand announced the first-ever mandatory framework, requiring that asset managers and financial institutions disclose their climate risks. In November 2020, the United Kingdom announced a disclosure requirement for financial institutions and large companies. Hong Kong financial regulators also announced that financial institutions and listed companies will have to comply with disclosures in line with the TFCD.